The documents did not elaborate on what would happen to the assets after they were moved off the banks' balance sheets.

"The effectiveness and success of the government's latest bid to cleanse the banking sector will hinge critically on this element of the plan," analysts at Daiwa Capital Markets wrote in a note to clients.

The reforms are designed to restore confidence in the Spanish banking sector as the nation's economy tumbled into recession. The government ultimately wants to ensure that bank balance sheets are healthy so they can resume lending to Spanish businesses and consumers, according to the documents.

Spain has already undertaken several attempts to clean up the financial sector under previous administrations. But many analysts say it will take hundreds of billions of euros to fix the problem once and for all.

That will prove challenging because the Spanish government has already warned that its budget deficit will be larger than expected this year.

At the same time, the nation's borrowing costs have been rising as investors in the bond market fear Spain could become the next euro area nation to fall victim to the debt crisis.